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6 December 2001 Edition

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Budget 2002

McCreevy's five years of failure


At one level you have to hand it to Charlie McCreevy. He can swagger through a budget speech with the best of them. For the fifth time he blustered and strutted, casually deriding Ruairi Quinn and Prionsias De Rossa and some of the Leinster House hecklers who dared question his budgetary logic. His story was not just one of the coalition's spending and tax plans for 2002, but it was an attempt to vindicate the last five years of Fianna Fáil and the Progressive Democrats in government. Mind you, there was scant reference to the junior coalition partners.


At another level, McCreevy's self-vindication of five years of mismanagement and missed opportunities by this government is unforgivable. By his own measures, he has failed to deliver on his promises to develop "our infrastructure, distributing resources fairly and creating a society that can look forward with confidence to the years ahead".

However, he wasn't the only one in the business of hard necks and short-term memories. Fine Gael's finance spokesperson Jim Mitchell, was Born Again in Leinster House this week.

Suddenly Jim has seen the light. He told us that the quality of a society was to be found in its health service, in the quality of its housing, in its ability to provide well paid and dignified employment. Yes, I know it is hard to believe that this is a from a man who has been in government for 14 out of the last 30 years, but there you go - five years of opposition can be a chastening experience for Fine Gael.

One month of government and we all know it will be business as usual, protecting vested interests and buttressing the establishment.


This was a very weak budget, with a lot of token measures aimed not at prudent and creative economic planning but at next year's Leinster House elections. McCreevy claimed that the aim of his budget was to "safeguard the vulnerable in society... prioritise our needs" and "continue to invest for the future".

This budget was classic Fianna Fáil, with increases in pensions and child benefit in an election year. Yes, these increases are welcome, but where is the childcare strategy we were promised not just five years ago but again and again throughout the lifetime of this government?

The minister has failed to deal with the need to create a national state-run childcare system, leaving thousands of parents spending huge parts of their income on childcare fees to crèches while they work long hours to pay huge mortgages and other costs.


McCreevy then told us that increases in child benefit were an effective means of tackling poverty. This is laughable. Figures from Combat Poverty and the Economic and Social Research Institute (ESRI) show that during this government and previous ones, the gap between rich and poor has grown.

170,000 children in the 26 Counties are suffering severe poverty while at least 370,000 are enduring some form of deprivation. What is the government really doing to tackle child poverty?


On pensions, the increases will no doubt be welcome, but they do not do enough to tackle the reality of the slide into poverty that many Irish pensioners have to endure. McCreevy made much of his increases in payments but no mention of the fact that between 1996 and 1999, the proportion of pensioners in the lowest 10% of income earners grew from 30% to 38%.

That is the reality McCreevy was glossing over; more pensioners are in the lowest income groups in society at the end of his tenure in government than were at the start.


Tax reform and equality were mentioned a lot by McCreevy. It is true that this minister favours the better off, despite his claims that this was a fiction. How else could he explain his decision to restore interest relief on rental income?

How can he explain that workers have a tax rate of 20% and 42% while business taxes were cut yet again to 16%? McCreevy did make references to the tax loopholes that allowed some people pay almost no income tax and boasted about how he has closed off most of them.. Then in the next breath he explained how tax reliefs were still required. So that means that some of our super wealthy citizens, those who are not already tax exiles, can pay less income tax than the average PAYE worker, in the guise of investment incentives.

McCreevy did increase the basic tax free allowances and take over 50,000 workers off the higher tax rate. However, there are still thousands of workers earning less than the minimum wage who are paying income tax.

Perhaps the most bizarre part of McCreevy's budget was the claim that of the tax measures he has announced only 11% were aimed at the high earners. What he forgot to say was that these earners actually got everything the low paid did plus another big slice of the tax cut cake.

It does not take into account that high earners can invest their substantial incomes into other areas and these people would gain from the halving of Capital Gains Tax from 40% to 20%. That was McCreevy's first budget.

It also doesn't take account of the tax shelters and reliefs that are still available for these high earners. Really Charlie, who are you trying to fool?


McCreevy devoted a small part of his speech to the pressing problem of the inadequate infrastructure of the 26 Counties. In McCreevyland this was not due to years of government neglect, more like something that had crept up on us unnoticed and now he was dealing with it.

So what did he propose? The increase in broadband funding to €55 million is a pittance, we need much more money spend on these vital services.

He mentioned increased spending in infrastructure, forgetting the pressing needs in power and telecommunications. The €550 million extra spending is only a small step towards what is actually needed.


Finally, much of the reaction to the budget has focused in on the decision to take money from the Central Bank and the Social Insurance Fund as a means to avoid borrowing money this year. There has been significant criticism of the proposals.

However, they point up the two greatest failings of this budget. These are a failure to make the hugely wealthy cough up a proper share of tax revenue and a need to kick start, even at this belated stage, a substantial investment in infrastructure. It is clear that the proposals in the National Development Plan are inadequate. But McCreevy only had eyes for a soft landing next June, while we will be paying for decades because of his mistakes over the last five years.

An Phoblacht
44 Parnell Sq.
Dublin 1

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